SNOW Rides on Enterprise AI Adoption: Can the Growth Continue?

Core Insights - Snowflake (SNOW) is experiencing growth driven by the increasing adoption of enterprise AI, which is becoming a key component of its growth strategy [1] - The company is recognized for being developer-friendly, enhancing its platform's attractiveness to users [1] Financial Performance - In Q2 of fiscal 2025, Snowflake reported product revenues of $1.09 billion, reflecting a 32% year-over-year growth [3][9] - The company achieved a net revenue retention rate of 125%, indicating strong customer loyalty and expansion [3][9] - The customer base grew by 19% to 12,062, with the number of customers generating over $1 million in trailing 12-month product revenues increasing by 30% to 654 [3][9] AI Data Cloud Impact - Snowflake's AI Data Cloud is pivotal for enterprises to utilize data and AI for enhanced innovation and operational efficiency [2] - In Q2 of fiscal 2026, nearly 50% of new customer logos were influenced by AI, and 25% of all deployed use cases involved AI [2][9] - Over 6,100 accounts are utilizing Snowflake's AI capabilities weekly, reinforcing its leadership in the enterprise AI sector [2] Product Portfolio and Partnerships - The expansion of Snowflake's product portfolio includes offerings like Apache Iceberg, Hybrid tables, Polaris, Cortex Large Language Model, and ML functions, which are attracting new clients [4] - The company has established a strong partner ecosystem, including notable companies like NVIDIA, Amazon, Microsoft, ServiceNow, and Meta Platforms [4] Competitive Landscape - Snowflake faces significant competition from Salesforce and ServiceNow, both of which are enhancing their enterprise-grade AI workflows [5] - ServiceNow reported 11 deals exceeding $5 million in net new annual contract value in Q2 of 2025, indicating its competitive strength [5] - Salesforce is leveraging AI-powered enterprise solutions, which are expected to drive revenue growth and strengthen its market position [6] Stock Performance and Valuation - Snowflake's shares have increased by 43.8% year-to-date, outperforming the broader Zacks Computer & Technology sector's return of 19.8% and the Zacks Internet Software industry's appreciation of 24.1% [7] - The stock is trading at a premium, with a forward 12-month Price/Sales ratio of 14.34X compared to the industry's 5.87X [10] - The consensus estimate for SNOW's fiscal 2026 earnings is $1.17 per share, reflecting an 8.54% increase over the past 30 days and a year-over-year increase of 40.96% [12]